I don’t want to embarrass IRS’s attorney, so I will mention no particulars about that person. But that person’s response to a petition that arrived in the mail with a USPS meter mark within the 90-day limit for reconsideration of a SNOD is embarrassing.

See Marion I. Tanner Trust Dated 03/28/2002, Rita A. Wilson, Trustee, Docket No. 13446-16S, filed 7/28/16.

Here’s that person’s motion. I’m leaving in the dates because they are material.

“2. The 90-day period for timely filing a petition with this Court from the notice of deficiency expired on June 5, 2016. June 5, 2016, was a Sunday, so the [90-day period for filing a timely Tax Court petition as to that] notice of deficiency expired on June 6, 2016.

“3. The petition was filed with the Tax Court on June 8, 2016, which date is 93 days after the mailing of the notice of deficiency and 2 days after the expiration of the notice of deficiency.

“4. The copy of the petition served upon Respondent bears no U.S. Postmark on the cover in which the petition was mailed to the Tax Court. There is a U.S. Postmeter stamped on the cover which reads “JUN 01 2016.”

“5. The irradiation process for mail sent to the United States Tax Court is approximately 7 days.

“6. The petition was not filed with the Court within the time prescribed by I.R.C. § 6213(a) or § 7502.” Order, at p. 1.

Ch J L. Paige (“Iron Fist”) Marvel is positively douce.

She sends that person off to check on Reg. 301.7502(c)(1)(iii)(B), about delivery when a mailing would ordinarily be delivered if timely mailed.

And exactly what the irradiation process has to do with this is unclear; if it ordinarily takes seven (count ‘em, seven) days for the radioactors to do their thing, so what? When did the petition arrive in their (literally) hot little hands?

But that person isn’t done yet. That person claims the petitioner hasn’t shown that Rita A. is truly the trustee.

Except the SNOD says she is.

So let that person file a supplement to that person’s motion to dismiss. “In that Supplement respondent shall set forth and discuss fully respondent’s position as to both (1) whether the petition in this case was filed timely in light of section 301.7502(c)(1)(iii)(B) of the regulations, and (2) based upon a diligent and good-faith search conducted by respondent, whether Rita A. Wilson is the duly appointed trustee of the trust.” Order, at p. 2.

As we say in The City That Never Sleeps, go figure.

On a day when I posted nothing (overwhelmed by Judge Chiechi’s 264 page magnum opus on the Indiana UFTA), my blog got 94 views. On the previous two days, when I did post something, I got 58 and 63 views respectively.

And mindblowingly (pardon the neologism), there was a day when I had posted nothing and my blog got 127 views. I forget when this was, and WordPress.com’s miserable statistics page doesn’t have it.

But why am I posting at all, when I could get more views if I shut up (as some have suggested)?

Maybe nothing is better than something.

And 264 Pages of Opinion

I’m floored; flabbergasted.

That’s the state in which your long-suffering blogger was left after a couple piña coladas (hi, Judge Holmes) and Thomas L. Weintraut, Transferee, et al, 2016 T. C. Memo. 142, filed 7/27/16.

Moreover, I am stupefied by Judge Chiechi’s labor in dealing with a deficiency amounting to around $750K, chops included. Multi millions have involved much less ink and toner.

I’m not even going to try to depth-blog the opinion. It’s an old MidCoast Midco roundy-round with the transferees (a family that owned a C Corp fan business; no, not the kind that cools your office or car, the kind that dries out grain before ensiloing same, lest in the throes of spontaneous combustion it blows up the census tract) and their advisors doing no due diligence, ignoring the smell test, while the MidCoasties use the old “secret formula” T-bill mix-and-match dodge.

It starts out as a stock sale, of course, mutates into an asset sale as the outside buyer wants no part of the C Corp, and when the tax bill (steep and double) is computed, their lawyer (no tax background) finds MidCoast, and their accountant doesn’t look too closely either.

MidCoast dresses up the scam with an opinion letter requiring reps of business purposes, which of course there aren’t. And all the players knew that the kicker MidCoast was paying for the C Corp stock was based upon not paying any income taxes.

So of course they are transferees. We reach this conclusion at page 154 after an exhaustive analysis of sham transaction, business purpose and economic substance.

But as a certain descendant of mine was wont to remark after reading Genesis 1:1, “Now, settle down. We have a long way to go.”

Comes now the Indiana version of the Uniform Fraudulent Transfers Act. Judge Chiechi writes a law review article on that subject alone (and if any son or daughter of Indiana wants a shot at law review, take that as thy text, and go read and write).

Subjective knowledge and good faith are entirely irrelevant. If the creditors were defrauded, it matters not that the transferees were not the fraudsters.

So what price Alterman? See my blogpost “It’s Not Fraud,” 12/1/15. Due diligence and getting good reps and warranties don’t count?

Roger that, says Judge Chiechi. “We conclude that the Indiana Supreme Court will not impose, and that the Court of Appeals for the Seventh Circuit will hold that the Indiana Supreme Court will not impose, the knowledge requirement before using Indiana substance over form principles in order to determine whether [C Corp] made a distribution or transfer under the Indiana UFTA of its property to each of Mr. F, Mr. Weintraut, and Ms. F in the [phony] sale transaction….” 2016 T. C. Memo. 142, at p. 197. (Citations and names omitted).

Maybe it’s a question of what IRS could prove on the trial, says I, and Judge Chiechi agrees. Even if knowledge did apply, says she, Weintraut and friends did nothing, looked at nothing, and didn’t want to know nothing, despite the usual malodorous emanations from the MidCoasties. Willful blindness.

And you have to treat the payouts to Weintraut and the et als as a single transfer.

But, at the end of the day, IRS hasn’t shown that what Weintraut and the et als got was equal to the deficiency, the chops, and the pre-notice interest.

So let’s have a Rule 155 beancount and numbercrunch.

Whew! I’m beat.

I’ve said it here often: I like conferences with the judge. If face-to-face, it lets me put a sympathetic face on my client (who may well need it). But even a teleconference lets me get a quick peek at the judge’s thinking, and spot any favorable view of my adversary’s case, or flaw in my own, that I need to counter.

But beware of picking up a judicial off-the-cuff as a hot tip, and altering your litigating position accordingly.

Case in point: an attorney I’ll call Harry, who narrowly dodges a Section 6673(a)(2) delay-of-the-game chop, in Pamela Hardin, Petitioner, and Robert H. Lattinville, Intervenor, 2016 T. C. Memo. 141, filed 7/26/16.

While Pam and Rob were still married (the years at issue), their MFJ 1040s were prepared and e-filed by Pam’s preparer, whom IRS finds to be a creative writer. And the only issue for Judge Chiechi is whether Pam gets Section 6015(f) equitable innocent spousery for the heavy-duty deficiencies said creative preparer unleashed upon her.

Pam was a CFP and money manager who ran a big-time money-management operation with a 99% client retention rate and hundreds of millions under management. Rob was a lawyer who minded his own business and only got hit for some relatively small creativity with respect to the K-1s he got from his law firm. Like Kay Corleone, he never asked about his spouse’s business.

IRS gave Rob only his own bad news, and gave Pam all the heavy lifting from her preparer’s creativity respecting her business.

Pam petitions. She never mentions spousal abuse or the disallowed deductions underpinning the SNOD, only that IRS shouldn’t have let Rob off the hook. IRS moves for summary J, saying Tax Court has no jurisdiction to decide what IRS gave Rob.

Judge Chiechi holds a teleconference. “…the Court held a telephonic conference… with petitioner’s counsel, intervenor’s counsel, and respondent’s [IRS’] counsel.  During that telephonic conference, the Court advised respective counsel for the parties that it does not have jurisdiction to address petitioner’s allegation in the petition that respondent erred in granting relief to intervenor under section 6015(c).  The Court further informed respective counsel for the parties during the… telephonic conference that it would deny respondent’s motion for summary judgment without prejudice and entertain a motion by petitioner for leave to file an amendment to petition or an amended petition.” 2016 T. C. Memo. 141, at p. 18.

Harry and Pam get creative their own selves.

“…petitioner filed a motion for leave to file amended petition and lodged an amended petition.  … the Court granted that motion and had petitioner’s amended petition filed as of that date.  In that amended petition, petitioner alleged that she is entitled to relief under section 6015(f) for each of the taxable years… because she was abused by intervenor and was not able to challenge the treatment of any items in the joint returns in question for fear of intervenor’s retaliation. …respondent filed an answer to the amended petition.  In that answer, respondent denied the allegations in the amended petition in support of petitioner’s claim to relief under Section 6015(f).” 2016 T. C. Memo. 141, at p. 19.

Pam’s case hangs on the seventh threshold provision in Rev. Proc. 2013-34, sec 4.01(7), 2013-43 I.R.B. at 399-400. Was she so abused she couldn’t object to Rob’s phony return?

“In support of petitioner’s contention that she was not able to challenge the erroneous items in question for fear of intervenor’s retaliation, petitioner relies only on her own testimony.  The Court did not find petitioner to be credible.  The Court found her testimony to be in certain material respects evasive, vague, conclusory, and/or inconsistent with certain other evidence in the record that the Court found to be credible.  The Court shall not rely on the testimony of petitioner to establish her position in this case.” 2016 T. C. Memo. 141, at p. 24 (Citation and footnote omitted, but I’ll put in the footnote.)

The omitted footnote. “Petitioner relies on her own testimony and on the respective testimonies of certain other witnesses in order to establish her claim that intervenor abused her.  At the conclusion of the trial in this case, the Court commented on the respective testimonies of those other witnesses, as well as the respective testimonies of petitioner and intervenor.  The Court will not repeat those comments here.” 2016 T. C. 141, at p. 24, footnote 9.

Judge Chiechi is not amused at using her teleconference as a springboard to bright ideas.

“We believe that petitioner’s contentions that she was abused by intervenor and that, as a result of that alleged abuse, she was not able to challenge the erroneous items in question for fear of intervenor’s retaliation were an after-thought that occurred to petitioner after the Court had informed respective counsel for the parties during the…telephonic conference that, as respondent maintained in respondent’s motion for summary judgment, the Court does not have jurisdiction to consider whether respondent should have granted relief to intervenor under section 6015(c).  Indeed, at the time of that telephonic conference, petitioner had not claimed in the petition in this case that intervenor’s alleged abuse prevented her from challenging the erroneous items in question for fear of intervenor’s retaliation.  Nor had she made that claim in petitioner’s Form 8857, in petitioner’s Form 12508, or in petitioner’s appeal during respondent’s administrative proceedings to consider petitioner’s claim to relief under section 6015.  The first time that petitioner claimed that intervenor’s alleged abuse prevented her from challenging the erroneous items in question for fear of intervenor’s retaliation was in the amended petition that the Court allowed her to file after the…telephonic conference in which it had advised the parties’ respective counsel, inter alia, that it would deny respondent’s motion for summary judgment without prejudice.” 2016 T. C. Memo. 141, at pp. 25-26.

So Judge Chiechi shows Pam the Section 6673(a)(1) yellow card.

And now the kicker.

“The Court believes that petitioner’s attorney of record multiplied the proceedings in this case unreasonably and vexatiously.  Nonetheless, the Court shall not sanction him at this time under section 6673(a)(2).  The Court cautions him that he may be subject to such a sanction if in the future he multiplies the proceedings in any case before this Court unreasonably and vexatiously.” 2016 T. C. Memo., 141, at p. 28.

The only one who should be vexatious is a US Davis Cup winner from 60 years ago.

José M. Curet echoes Steven Sondheim’s words from sixty years ago in 2016 T. C. Memo. 138, filed 7/25/16.

José was a self-employed consulting engineer who resided in Puerto Rico throughout the year at issue. He paid income tax timely to the Commonwealth, but never paid SE. José said he didn’t owe any US tax, only Puerto Rico tax.

Wrong, José.

“Petitioner argues that he was not subject to any U.S. tax for 2010 because he was a resident of Puerto Rico.  Petitioner had net earnings from self-employment as evidenced by his Schedule M that he filed along with his Form 482.0.  Although he was a resident of Puerto Rico during 2010, per section 1402(a)(6), petitioner was not exempt from U.S. self-employment tax.  We conclude petitioner is liable for self-employment tax.” 2016 T. C. Memo. 138, at pp. 4-5.

As for additions and chops, “Respondent [IRS] has shown, and petitioner does not dispute, that petitioner failed to pay his Federal income tax obligations for 2010.  Respondent has established that the Secretary prepared a substitute for return for 2010 that satisfies requirements of section 6020(b) by providing a Form 4549-A, a Form 886-A, and a Form 13496 for tax year 2010.  See Cabirac v. Commissioner, 120 T.C. at 170-172.  Respondent has met the burden of production.” 20156 T. C. Memo. 138, at p. 6.

José claims he talked to a Puerto Rican tax adviser, but same doesn’t testify. So no evidence adviser had any qualifications, or had all the information, or that José relied in good faith.

Torgeir Mantor isn’t lucky with his notes. We ran into him back in 2014; see my blogpost “A Sour Note,” 9/3/14. Now he’s doing a reprise with American Metallurgical Coal Co. And Subsidiaries, 2016 T. C. Memo. 139, filed 7/25/16. AMC is mixing-and-matching with a Liberian outfit (Lausanne) and an AMC subsidiary (Heimdal).

They’re running a CA geothermal deal, and Torgeir was VP of AMC. But Heimdal had to restructure when the US-Netherlands Antilles treaty ran out. Plus, they needed to keep within the bounds of financing covenants with third-party lenders. And they needed to funnel the profits offshore without paying US withholding.

Wherefore much corporate wheeling-dealing followed, in aid of which Torgeir and crew signed up a US Big Four partner, but no formal opinion was issued, and some of the advice (like annual statements of ownership) didn’t get followed.

The funnel was (you guessed it) a note, for a sale of partnership units from one sub to another.

Judge Cohen looked at the note.

“For a promissory note to constitute bona fide indebtedness, there must be an unconditional legally enforceable obligation to pay the money.  Horn v. Commissioner, 90 T.C. 908, 938 (1988).  The ‘simple expedient of drawing up papers’ is not controlling for tax purposes when “the objective economic realties [sic] are to the contrary.”  Frank Lyon Co. v. United States, 435 U.S. 561, 573 (1978).” 2016 T. C. Memo. 139, at p. 22.

After a quick peek at twelve (count ‘em, twelve)  factors, none of which is dispositive and some of which are more equal than others, Judge Cohen strikes up facts and circumstances (Sir Ed Elgar should get royalties).

And  Judge Cohen, with an eye to the future, cuts to the chase.

“The real issue for tax purposes has long been held to be the extent to which the transaction complies with arm’s length standards and normal business practice. The various factors are only aids in answering the ultimate question of whether there was ‘a genuine intention to create a debt, with a reasonable expectation of repayment, and did that intention comport with the economic reality of creating a debtor-creditor relationship?’  The form of the transaction and the labels the parties place on the transaction may not have as much significance when the parties can mold the transaction at their will.    The Internal Revenue Service recently released proposed regulations in an attempt to bring clarity and consistency to the analysis of distinguishing between indebtedness and equity investments.  See Notice of Proposed Rulemaking, 81 Fed. Reg. 20912 (Apr. 8, 2016).  Because the transaction at issue in these cases took place more than 20 years ago, we mention these regulations for posterity’s sake only.” 2016 T. C. Memo. 139, at p. 24. (Citations omitted).

This was an equity investment disguised as a loan. There was no negotiation, Torgeir and crew were on all sides of the table, and the only aim was not to pay tax. This went beyond the deal driven by economic or regulatory realities, but devised in a tax-efficient manner, which is OK.

Economic substance, fellas. Arms’-length dealing.

Unfortunately, Torgeir doesn’t dodge the chops, as he did in my blogpost aforementioned.

Takeaway—If you’re doing notes, make them real. Tell ‘em Torgeir sent you.

 Off Again, On Again, Gone Again, Finnegan

I take my subtitle from the 1917 poem that Strickland Gillilan used to introduce same to lovers of verse.

You remember John and Joan Finnegan, induced to fiscal sin by the fraudster Howell. If not, see my blogpost “The Fraudster’s Toolbox,” 6/17/16.

Now my blogpost aforementioned dealt with Howell’s skullduggery, but the Finnegans came unglued over the SOL. The standard three had run. IRS claimed unlimited due to Howell’s fraud; IRS never claimed that the Finnegans were fraudsters.

The Finnegans lost when trial counsel admitted that the return, not the Finnegans, was fraudulent.

Comes now a very well-known law firm, which I shall call The Jersey Boys, and moves to reargue. They kindly sent me their motions papers, which I read.

They rely on a USCFC decision, upheld by USCA Fed Cir. The upholder is BASR Partnership v. USA, No. 2014-5037 (7/29/15), which hadn’t been published when Finnegan was argued back in 2014.

Note again that it took nearly two years after trial for an opinion. Justice delayed is…but you know the rest.

BASR says that fraud, whether for imposition of the 75% chop or keeping SOL alive indefinitely, must be the taxpayer’s fraud, not the preparer’s. In doing so, Fed Cir deftly sidesteps poor old Ray Fouche (as to whose sad story see my blogpost “The Cover-Up – Uncovered,” 4/24/13). But Ray was in 2 Cir.

The Finnegans, being Floridians when they petitioned, are Golsenized to 11 Cir. And 11 Cir. doesn’t seem to have ruled on the issue.

I once again point out how ridiculous it is that the one Federal statute that affects more people, both US citizens and non-citizens, than any other; which moreover is a minefield in the middle of a toxic waste site, where even those highly-educated who have spent their working lives dealing with little else can come disastrously to grief; is most often adumbrated by non-specialists on a purely geographical luck-of-the-draw. There has to be a National Tax Circuit Court of Appeals, and the bench has to be comprised of specialists.

Back to business. You can read BASR for yourselves, and the taxpayers (a Jenkens-and-Gilchrest client; I’ll say no more) are sympathetic. As, I’m sure, are the Finnegans.

But the Fed Cir majority seems to think that taxpayers employ preparers only for complex returns. The statistics are overwhelmingly the other way. The tax prep industry is huge, and largely unregulated; Doug Shulman’s abortive efforts went down in well-publicized flames. And apparently Congress doesn’t feel moved to do anything. Wherefore in the Wild West atmosphere of tax prep, where the key to success is “I’ll get ya a big refund” and where the first casualty is the usual, no one should be surprised that there’s a big premium on fast-and-loose. And the revenue losses have to be enormous.

So without wishing to rain on the Finnegans’ parade, I quote the dissent in BASR, from Ch J Prost: “The majority removes a key tool from the IRS’s toolbox for policing the submission of fraudulent tax returns. Nearly all taxpayers with significant sums at issue employ a tax preparer. Often, the IRS uncovers fraudulent returns by discovering the tax professionals who perpetrate fraud. It is not an easy matter to discover fraud, fully investigate it, and determine the proper tax liability within three years. See id. It is even more difficult to prove that a taxpayer knew of a tax professional’s fraud and acted with intent to evade tax. Nonetheless, the majority ties the IRS’s hands behind its back—without impossibly speedy sleuthing or smoking gun evidence, the IRS cannot collect taxes owed and the perpetrators make away scot free.”

The taxpayer chose the fraudster. The rest of us taxpayers didn’t.

A reader pointed out that the T.C. I blogged yesterday, CGG Americas, Inc., 147 T. C. 2, filed 7/21/16, apparently took four (count ‘em, four) years to write. I hadn’t done a docket search, but when I looked just now, the Tax Court docket showed the last entry as 10/17/12, and the case was filed 11/12/10. So the opinion took roughly four years from when the last papers were filed, and six years from when the case was filed.

I asked the reader “how if the taxpayer owed the deficiencies, with interest running?” Rhetorical, of course, in this case, as taxpayer won.

But it brought back memories of poor Beverly Bernice Bang. See my blogpost “Bang – A Warning to Tax Matters Partners (and their advisors).” 1/5/11.

And just today Big Julie, His Honor Judge Julian I Jacobs (hereinafter “HHBJJJIJ”), has another example.

It’s a one page designated hitter, BC/Falcon Coconut Creek, LLC, BC Coconut Creek, LLC, Tax Matters Partner, Docket No. 19037-12, filed 7/22/16.

“Respondent’s counsel requested that the Court set a trial date for this case. Petitioners counsel did not object but requested that the case not be set for trial for at least a year.” Order, at p. 1.

OK, says HHBJJJIJ, try it in November 2017.

And if the interest is running, someone is in for a shock if they lose.

STJ Daniel A. (“Yuda”) Guy figures maybe the Ogden Sunseteers get one right occasionally in Peter Alexander Goodwin, Docket No. 23146-15W, filed 7/22/16.

Senior Tax Analyst C “was assigned to evaluate petitioner’s application for a whistleblower award. In carrying out his responsibilities, he collected and reviewed all documents that were required to be included in the administrative claim file, and he interviewed audit team personnel to obtain relevant information.” Order, at pp. 1-2. (Name omitted).

The upshot of STA C’s efforts are found in his unsworn but subscribed under penalty of perjury declaration, cited in extenso by STJ Yuda. STA C attaches every document, especially the LB&I “stand-down” determining that the capitalization-vs-expensing audits should be discontinued, and anyway the mismatches that Peter Alexander raises would be shortly wiped out due to MACRIS.

So IRS did nothing, like a certain world-famous nocturnal canine.

“Petitioner maintains that the Commissioner’s failure to conduct an examination of the taxpayer in respect of the items that he identified in his Form 211 and related documents violates the IRS’s mission statement and is contrary to the public policy underlying section 7623(b). He further asserts that the information he provided related to some assets that were not the subject of the stand-down directive and, in any event, the Commissioner should have initiated an examination upon termination of the stand-down directive.” Order, at p. 4.

Maybe so, but Section 7623 doesn’t let Tax Court second-guess IRS.

“The record reflects (and petitioner does not dispute) that the Commissioner did not initiate an administrative or judicial action against the taxpayer as a result of the information that petitioner provided, nor were any proceeds collected from the taxpayer that would support a whistleblower award under section 7623(b). As discussed above, it is well settled that the Court is not authorized to direct the Commissioner to commence an administrative or judicial action.” Order, at pp. 4-5.

The problem is the statute, not Tax Court. Whistleblowing should be in USDC, with a broader mandate from Congress.

“Darling, It’s Better, Down Where It’s Wetter, Take It From Me”

Judge Morrison is belting out the Alan Menken and Howard Ashman 1989 Academy Award winner, as he drowns the IRS in CGG Americas, Inc, 147 T. C. 2, filed 7/21/16.

CGG is a submarine seismic reflector. Here’s how the parties stipulated it works.

“Boats would tow submerged arrays of pneumatic chambers that had been pressurized with compressed air. At regular intervals, the chambers were triggered to produce pulses of sound energy. The sound waves generated by this process traveled through the solids, liquids, and gases that made up the geological formations in the substructure of the ocean floor, were reflected back to the water surface, and were captured by groups of special microphones (called hydrophones) that converted the captured sound energy into electrical impulses.

“The data initially generated by the surveys was raw acoustic data. CGGA processed (and reprocessed) the raw acoustic data to create usable information such as visual representations (including maps) of geological formations in the earth’s subsurface.” 147 T. C. 2, at pp. 4-5.

What effects this has on Sebastian the Crab and his aquatic fellows I cannot tell. As this is a nonpolitical blog, I will refrain from comments on climate change, ocean acidification, marine life and similar matters; my views are available elsewhere.

By way of disclosure, I am a charter member of the Cousteau Society.

Howbeit, as the info that CGG thus obtained was flogged to would-be lessors, lessees, drillers and purchasers of pieces of the continental shelf in the Gulf of Mexico to hunt for petroleum, did CGG get the Section 167(h)(1) quick-kick 24-month write-off of their considerable costs in so doing?

That provision accords quick-kick to expenses for geological and geophysical exploration with a view to extracting oil, and CGG is clearly in that hunt.

But CGG owns nothing, leases nothing, and drills for nothing. And their data was useful for nothing other than finding oil. Their customers weren’t doing their own versions of the work CGG was doing.

So IRS says they have to capitalize their expenses.

No, says Judge Morrison. In all the cases and Rev. Rul.s IRS cites, nowhere does it say that geological and geophysical exploration expenses can only be deductible if incurred by the drillbabies.

IRS says the statute is unambiguous, so legislative intent not needed. Judge Morrison sends that argument out to sea. But after exhaustively (and exhaustingly) traversing decades of bills that went nowhere, with tons of testimony before Congress thrown in, here’s where Judge Morrison surfaces.

“Accepting that Congress intended section 167(h) to apply to owners of mineral interests, this does not dispose of the question of whether nonowners are governed by section 167(h). Congress’s principal concern when it enacted section 167(h) may have been owners. But that does not mean that section 167(h) covers owners and no other types of taxpayers. A law can achieve effects different than those that Congress principally intended to achieve in enacting the law. As the Supreme Court held in Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75 (1998), ‘[i]t is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.’ Id. at 79.” 147 T.C. 2, at p. 40.

Ultimately, nowhere has Congress stated unequivocally that only drillbabies get the quick-kick.

IRS has a last-gasp argument that the exploration is carried out by the drillbabies and not CGG. But the CGG info is essential; if CGG didn’t do it, the drillbabies would have to. You can’t spend money drilling at random and hope to hit oil. Clark Gable and Spencer Tracy are dead, and “Boom Town” was so 1940. And forget Jett Rink (if you can; the GMOD never can).

The IRS is sunk.